Schwab Reports Strongest Quarterly Performance in Company History

By: The Charles Schwab Corporation via Business Wire

October 17, 2022 at 08:45 AM EDT

$115 Billion in Core Net New Assets Represents a 7% Annualized Growth Rate

Revenues Rise 20% Year-Over-Year to $5.5 Billion; Net Income Reaches $2.0 Billion, up 32%

Record GAAP Earnings Per Share of $.99, $1.10 Adjusted ⁽¹⁾ as Company Delivers Growth Plus Capital Return

The Charles Schwab Corporation announced today that its net income for the third quarter of 2022 was a record $2.0 billion compared with $1.8 billion for the second quarter of 2022, and $1.5 billion for the third quarter of 2021. Net income for the nine months ended September 30, 2022 was $5.2 billion, compared with $4.3 billion for the year-earlier period.

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	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
Financial Highlights ⁽¹⁾	2022			2021			Change		2022			2021			Change

Net revenues (in millions)	$	5,500		$	4,570		20	%	$	15,265		$	13,812		11	%
Net income (in millions)
GAAP	$	2,020		$	1,526		32	%	$	5,215		$	4,275		22	%
Adjusted ⁽¹⁾	$	2,211		$	1,722		28	%	$	5,783		$	4,895		18	%
Diluted earnings per common share⁽²⁾
GAAP	$	.99		$	.74		34	%	$	2.53		$	2.06		23	%
Adjusted ⁽¹⁾	$	1.10		$	.84		31	%	$	2.83		$	2.39		18	%
Pre-tax profit margin
GAAP		48.7	%		44.0	%				44.5	%		41.2	%
Adjusted ⁽¹⁾		53.3	%		49.6	%				49.4	%		47.2	%
Return on average common stockholders’ equity (annualized)		25	%		12	%				18	%		11	%
Return on tangible common equity (annualized) ⁽¹⁾		74	%		23	%				42	%		21	%

⁽¹⁾		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.
⁽²⁾		All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.

Co-Chairman and CEO Walt Bettinger said, “Schwab’s performance during the third quarter reflected the continued success of our 'Through Clients’ Eyes' strategy and our contemporary full-service approach to helping clients achieve their financial goals. As we assisted investors with navigating persistent macroeconomic headwinds, we continued to drive robust business growth. Bolstered by record third quarter retail inflows, core net new assets equaled $115 billion for the period – a 7% annualized growth rate. Total client assets were $6.6 trillion at quarter-end, down 13% from a year ago, as robust asset gathering was more than offset by the $1.4 trillion impact of lower market valuations on client portfolios over the past 12 months. At the same time, our success in attracting and retaining clients supported a 4% year-over-year rise in active brokerage accounts – we ended the quarter at approximately 34 million.”

“Our modern wealth management approach provides a wide array of investing and financial capabilities to support investors through a range of market conditions – particularly in difficult times like these,” Mr. Bettinger continued. “Equity markets remained under pressure throughout the quarter – including the largest percentage drop for a September since 2008 – with the S&P 500^® extending its year-to-date losses to 25%. The Federal Reserve assumed an increasingly hawkish stance, tightening monetary policy at the fastest rate in four decades, as it wrestled with elevated inflation and lingering effects from the global pandemic. Additionally, the continued war in Ukraine, along with increasing challenges across other major global economies weighed on overall market sentiment. That being said, clients remained engaged – with daily average trading volume of 5.5 million essentially flat versus the third quarter of last year, including net buying activity across both equities and fixed income securities.”

“Given our four decades of experience assisting individual investors and the advisors who serve them, we know prolonged environmental challenges can impact clients’ financial confidence, reinforcing the importance of continued investment across our three strategic initiatives: scale and efficiency, client segmentation, and win-win monetization,” Mr. Bettinger added. “Schwab’s extensive suite of advisory solutions, along with the recently introduced personalized investing capabilities, are designed to help clients achieve their evolving goals throughout their financial lives. This suite includes Wasmer Schroeder^TM Strategies, which offers investors a range of tax-exempt and taxable fixed income solutions. This team’s expertise, along with an attractive value proposition, increasing client demand for income solutions, and rising interest rates has helped these strategies attract over $5 billion in net flows over the last two years, including $1 billion during the third quarter of 2022 alone. Another example of win-win monetization is the recent steps we have taken to bolster our fund offering for RIAs by expanding our institutional no transaction fee (INTF) mutual fund platform to include over 800 additional highly rated equity and bond funds across 15 leading third-party asset managers.”

Mr. Bettinger concluded, “Through consistent strategic focus and disciplined execution, we believe we can drive sustained business momentum while continuing to deliver a high-quality wealth experience for clients and to build long-term value for stockholders.”

CFO Peter Crawford noted, “Schwab’s diversified financial model and a significant benefit from higher rates helped us convert ongoing success with clients into record total revenues of $5.5 billion, up 20% on a year-over-year basis. Net interest revenue increased by 44% to $2.9 billion, as rising rates helped our net interest margin to expand sequentially by 35 basis points to 1.97%. This movement more than offset the 6% contraction in interest-earning assets driven by clients’ cash sorting behavior and their continued market engagement. Asset management and administration fees decreased 5% to $1.0 billion as the challenging equity markets weighed on client asset balances. Trading revenue also declined slightly to $930 million primarily due to a mix shift within client trading activity.”

Mr. Crawford continued, “Driven largely by ongoing investments in our people and technology, GAAP expenses for the quarter increased 10% year-over-year to $2.8 billion. This amount includes $101 million in acquisition and integration-related costs and $152 million in amortization of acquired intangibles. Exclusive of these items, adjusted total expenses ⁽¹⁾ were up 12% versus the third quarter of 2021 – consistent with our planned spending in 2022. Our pre-tax profit margin expanded to 48.7%, or 53.3% on an adjusted basis ⁽¹⁾ – both all-time highs.”

“Diligent balance sheet management keeps us positioned to navigate a rapidly evolving environment while concurrently enhancing our financial performance and returning excess capital to our owners,” added Mr. Crawford. “In late July, the board of directors approved a 10% increase in our common dividend and a $15 billion stock repurchase authorization. During the third quarter, we repurchased 21.9 million shares for $1.5 billion. We’ve also announced the redemption of the $400 million Series A Preferred stock effective November 1. Inclusive of these actions, the company’s preliminary Tier 1 Leverage Ratio at quarter-end was 6.8%, above our recently updated operating objective of 6.50% – 6.75%. This quarter’s record overall results further demonstrate the durability of our all-weather model and its ability to deliver both profitable growth and meaningful return of excess capital through the cycle.”

⁽¹⁾ Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary. The most recent commentary, which provides perspective on the recent repurchase of nonvoting common stock, was posted on August 1, 2022.

Fall Business Update

The company has scheduled a Fall Business Update for institutional investors on Thursday, October 27, 2022. The Update, which will be held via webcast, is scheduled to run from approximately 10:00 a.m. - 11:00 a.m. PT, 1:00 p.m. - 2:00 p.m. ET. Registration for this Update is accessible at https://www.aboutschwab.com/schwabevents.

Forward-Looking Statements

This press release contains forward-looking statements relating to success with clients; strategic initiatives; investments to attract and retain talent, improve service and the client experience, expand products, services and offerings to meet client needs, diversify revenues, and drive scale and efficiency; business momentum; stockholder value; balance sheet management; financial performance; returning excess capital to stockholders; Tier 1 Leverage Ratio operating objective; and all-weather model. These forward-looking statements reflect management’s expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the company’s ability to attract and retain clients and independent investment advisors and grow those relationships and client assets; develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; hire and retain talent; support client activity levels; successfully implement integration strategies and plans; manage expenses; and monetize client assets. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including equity valuations and the level of interest rates; the level and mix of client trading activity; market volatility; margin loan balances; securities lending; competitive pressures on pricing; client cash sorting; client sensitivity to rates; level of client assets, including cash balances; capital and liquidity needs and management; balance sheet positioning relative to changes in interest rates; interest earning asset mix and growth; the migration of bank deposit account balances; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 33.9 million active brokerage accounts, 2.3 million corporate retirement plan participants, 1.7 million banking accounts, and $6.64 trillion in client assets. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, https://www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.aboutschwab.com.

TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are separate but affiliated companies and subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net Revenues
Interest revenue	$	3,357		$	2,153		$	8,386		$	6,236
Interest expense		(431	)		(123	)		(733	)		(348	)
Net interest revenue		2,926			2,030			7,653			5,888
Asset management and administration fees ⁽¹⁾		1,047			1,101			3,167			3,164
Trading revenue		930			964			2,778			3,135
Bank deposit account fees		413			323			1,059			1,011
Other		184			152			608			614
Total net revenues		5,500			4,570			15,265			13,812
Expenses Excluding Interest
Compensation and benefits		1,476			1,303			4,448			4,051
Professional services		264			250			766			723
Occupancy and equipment		292			246			855			722
Advertising and market development		89			119			296			363
Communications		131			144			444			457
Depreciation and amortization		167			140			476			404
Amortization of acquired intangible assets		152			153			460			461
Regulatory fees and assessments		65			64			200			208
Other		187			140			530			733
Total expenses excluding interest		2,823			2,559			8,475			8,122
Income before taxes on income		2,677			2,011			6,790			5,690
Taxes on income		657			485			1,575			1,415
Net Income		2,020			1,526			5,215			4,275
Preferred stock dividends and other		136			120			401			364
Net Income Available to Common Stockholders	$	1,884		$	1,406		$	4,814		$	3,911
Weighted-Average Common Shares Outstanding:
Basic		1,887			1,888			1,892			1,885
Diluted		1,895			1,898			1,901			1,895
Earnings Per Common Shares Outstanding ⁽²⁾:
Basic	$	1.00		$	.74		$	2.54		$	2.07
Diluted	$	.99		$	.74		$	2.53		$	2.06

⁽¹⁾		No fee waivers were recognized for the three months ended September 30, 2022. Includes fee waivers of $57 million for the nine months ended September 30, 2022, and $83 million and $246 million for the three and nine months ended September 30, 2021, respectively.
⁽²⁾		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
	Q3-22 % change				2022									2021
	vs.		vs.		Third			Second			First			Fourth			Third
(In millions, except per share amounts and as noted)	Q3-21		Q2-22		Quarter			Quarter			Quarter			Quarter			Quarter
Net Revenues
Net interest revenue	44	%	15	%	$	2,926		$	2,544		$	2,183		$	2,142		$	2,030
Asset management and administration fees	(5	) %	—			1,047			1,052			1,068			1,110			1,101
Trading revenue	(4	) %	5	%		930			885			963			1,017			964
Bank deposit account fees	28	%	17	%		413			352			294			304			323
Other	21	%	(29	) %		184			260			164			135			152
Total net revenues	20	%	8	%		5,500			5,093			4,672			4,708			4,570
Expenses Excluding Interest
Compensation and benefits	13	%	4	%		1,476			1,426			1,546			1,399			1,303
Professional services	6	%	2	%		264			258			244			271			250
Occupancy and equipment	19	%	(1	) %		292			294			269			254			246
Advertising and market development	(25	) %	(15	) %		89			105			102			122			119
Communications	(9	) %	(22	) %		131			169			144			130			144
Depreciation and amortization	19	%	5	%		167			159			150			145			140
Amortization of acquired intangibles assets	(1	) %	(1	) %		152			154			154			154			153
Regulatory fees and assessments	2	%	(3	) %		65			67			68			67			64
Other	34	%	—			187			187			156			143			140
Total expenses excluding interest	10	%	—			2,823			2,819			2,833			2,685			2,559
Income before taxes on income	33	%	18	%		2,677			2,274			1,839			2,023			2,011
Taxes on income	35	%	37	%		657			481			437			443			485
Net Income	32	%	13	%	$	2,020		$	1,793		$	1,402		$	1,580		$	1,526
Preferred stock dividends and other	13	%	(4	) %		136			141			124			131			120
Net Income Available to Common Stockholders	34	%	14	%	$	1,884		$	1,652		$	1,278		$	1,449		$	1,406
Earnings per common share ⁽¹⁾:
Basic	35	%	15	%	$	1.00		$	.87		$	.67		$	.77		$	.74
Diluted	34	%	14	%	$	.99		$	.87		$	.67		$	.76		$	.74
Dividends declared per common share	22	%	10	%	$	.22		$	.20		$	.20		$	.18		$	.18
Weighted-average common shares outstanding:
Basic	—		—			1,887			1,896			1,894			1,892			1,888
Diluted	—		—			1,895			1,904			1,905			1,902			1,898
Performance Measures
Pre-tax profit margin						48.7	%		44.6	%		39.4	%		43.0	%		44.0	%
Return on average common stockholders’ equity (annualized) ⁽²⁾						25	%		19	%		12	%		12	%		12	%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents	36	%	(28	) %	$	46.5		$	64.6		$	91.1		$	63.0		$	34.3
Cash and investments segregated	4	%	(18	) %		44.1			53.5			54.4			53.9			42.3
Receivables from brokerage clients — net	(15	) %	(3	) %		73.9			76.1			84.1			90.6			86.6
Available for sale securities ⁽³⁾	(37	) %	(11	) %		236.5			265.3			272.0			390.1			377.0
Held to maturity securities ⁽³⁾	N/M		(4	) %		96.3			100.1			105.3			—			—
Bank loans — net	28	%	2	%		40.4			39.6			37.2			34.6			31.6
Total assets	(5	) %	(9	) %		577.6			637.6			681.0			667.3			607.5
Bank deposits	—		(10	) %		395.7			442.0			465.8			443.8			395.3
Payables to brokerage clients	(3	) %	(4	) %		110.0			114.9			125.3			125.7			113.1
Short-term borrowings	(83	) %	(64	) %		0.5			1.4			4.2			4.9			3.0
Long-term debt	7	%	(1	) %		20.8			21.1			21.9			18.9			19.5
Stockholders’ equity	(36	) %	(17	) %		37.0			44.5			48.1			56.3			57.4
Other
Full-time equivalent employees (at quarter end, in thousands)	9	%	—			35.2			35.2			34.2			33.4			32.4
Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)	10	%	(43	) %	$	193		$	339		$	209		$	431		$	176
Expenses excluding interest as a percentage of average client assets (annualized)						0.16	%		0.16	%		0.15	%		0.13	%		0.13	%
Clients’ Daily Average Trades (DATs) (in thousands)	—		(11	) %		5,523			6,227			6,578			6,102			5,549
Number of Trading Days	—		3	%		64.0			62.0			62.0			63.5			64.0
Revenue Per Trade ⁽⁴⁾	(3	) %	15	%	$	2.63		$	2.29		$	2.36		$	2.62		$	2.71

⁽¹⁾		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.
⁽²⁾		Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
⁽³⁾		In January 2022, the Company transferred a portion of its investment securities designated as available for sale to the held to maturity category, as described in Part I – Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.
⁽⁴⁾		Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions, except ratios or as noted)
(Unaudited)
	Three Months Ended September 30,												Nine Months Ended September 30,
	2022						2021						2022							2021
	Average Balance		Interest Revenue/ Expense		Average Yield/ Rate		Average Balance		Interest Revenue/ Expense		Average Yield/ Rate		Average Balance		Interest Revenue/ Expense			Average Yield/ Rate		Average Balance		Interest Revenue/ Expense			Average Yield/ Rate
Interest-earning assets
Cash and cash equivalents	$	53,127	$	294	2.16	%	$	38,732	$	11	0.12	%	$	63,598	$	461		0.95	%	$	39,848	$	27		0.09	%
Cash and investments segregated		49,554		214	1.69	%		42,617		5	0.04	%		50,891		308		0.80	%		43,914		19		0.06	%
Receivables from brokerage clients		72,751		912	4.91	%		80,873		628	3.04	%		78,630		2,244		3.76	%		74,831		1,800		3.17	%
Available for sale securities ^(1,2)		273,968		1,161	1.69	%		362,204		1,187	1.30	%		281,897		3,196		1.51	%		348,477		3,381		1.29	%
Held to maturity securities ⁽²⁾		97,568		345	1.41	%		—		—	—			100,890		1,062		1.40	%		—		—		—
Bank loans		39,984		300	2.99	%		30,235		161	2.12	%		38,238		717		2.50	%		27,336		448		2.18	%
Total interest-earning assets		586,952		3,226	2.17	%		554,661		1,992	1.42	%		614,144		7,988		1.73	%		534,406		5,675		1.41	%
Securities lending revenue				124						159						383							557
Other interest revenue				7						2						15							4
Total interest-earning assets	$	586,952	$	3,357	2.26	%	$	554,661	$	2,153	1.54	%	$	614,144	$	8,386		1.81	%	$	534,406	$	6,236		1.55	%
Funding sources
Bank deposits	$	420,132	$	241	0.23	%	$	384,561	$	14	0.01	%	$	440,801	$	285		0.09	%	$	371,974	$	40		0.01	%
Payables to brokerage clients		96,802		41	0.17	%		92,498		3	0.01	%		101,472		47		0.06	%		89,087		7		0.01	%
Short-term borrowings		708		4	1.95	%		3,485		3	0.34	%		2,656		12		0.60	%		2,617		6		0.32	%
Long-term debt		21,024		131	2.49	%		19,030		99	2.10	%		20,673		363		2.34	%		17,225		281		2.18	%
Total interest-bearing liabilities		538,666		417	0.31	%		499,574		119	0.09	%		565,602		707		0.17	%		480,903		334		0.09	%
Non-interest-bearing funding sources		48,286						55,087						48,542							53,503
Securities lending expense				13						4						28							16
Other interest expense				1						—						(2	)						(2	)
Total funding sources	$	586,952	$	431	0.29	%	$	554,661	$	123	0.09	%	$	614,144	$	733		0.16	%	$	534,406	$	348		0.09	%
Net interest revenue			$	2,926	1.97	%			$	2,030	1.45	%			$	7,653		1.65	%			$	5,888		1.46	%

⁽¹⁾		Amounts have been calculated based on amortized cost.
⁽²⁾		In January 2022, the Company transferred a portion of its investment securities designated as available for sale to the held to maturity category, as described in Part I – Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
	Three Months Ended September 30,													Nine Months Ended September 30,
	2022						2021							2022							2021
	Average Client Assets		Revenue		Average Fee		Average Client Assets		Revenue			Average Fee		Average Client Assets		Revenue			Average Fee		Average Client Assets		Revenue			Average Fee
Schwab money market funds before fee waivers	$	184,834	$	132	0.28	%	$	149,508	$	112		0.30	%	$	158,525	$	340		0.29	%	$	158,749	$	348		0.29	%
Fee waivers				—						(83	)						(57	)						(246	)
Schwab money market funds		184,834		132	0.28	%		149,508		29		0.08	%		158,525		283		0.24	%		158,749		102		0.09	%
Schwab equity and bond funds, ETFs, and collective trust funds (CTFs)		422,711		89	0.08	%		441,344		99		0.09	%		436,928		278		0.09	%		411,312		279		0.09	%
Mutual Fund OneSource^® and other non-transaction fee funds		183,019		139	0.30	%		234,582		188		0.32	%		196,032		453		0.31	%		228,643		540		0.32	%
Other third-party mutual funds and ETFs		747,676		160	0.08	%		918,363		187		0.08	%		805,204		510		0.08	%		888,003		533		0.08	%
Total mutual funds, ETFs, and CTFs⁽¹⁾	$	1,538,240		520	0.13	%	$	1,743,797		503		0.11	%	$	1,596,689		1,524		0.13	%	$	1,686,707		1,454		0.12	%
Advice solutions ⁽¹⁾
Fee-based	$	431,276		452	0.42	%	$	463,827		511		0.44	%	$	446,979		1,409		0.42	%	$	445,521		1,469		0.44	%
Non-fee-based		85,567		—	—			90,649		—		—			87,528		—		—			87,758		—		—
Total advice solutions	$	516,843		452	0.35	%	$	554,476		511		0.37	%	$	534,507		1,409		0.35	%	$	533,279		1,469		0.37	%
Other balance-based fees ⁽²⁾		537,809		58	0.04	%		632,806		68		0.04	%		573,733		186		0.04	%		604,995		195		0.04	%
Other ⁽³⁾				17						19							48							46
Total asset management and administration fees			$	1,047					$	1,101						$	3,167						$	3,164

⁽¹⁾		Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Wealth Advisory^TM, Schwab Managed Portfolios^TM, Managed Account Select^®, Schwab Advisor Network^®, Windhaven Strategies^®, ThomasPartners^® Strategies, Schwab Index Advantage^® advised retirement plan balances, Schwab Intelligent Portfolios^®, Institutional Intelligent Portfolios^®, Schwab Intelligent Portfolios Premium^®, TD Ameritrade AdvisorDirect^®, Essential Portfolios, Selective Portfolios, and Personalized Portfolios; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For the total end of period view, please see the Monthly Activity Report.
⁽²⁾		Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
⁽³⁾		Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)
	Q3-22 % Change				2022									2021
	vs.		vs.		Third			Second			First			Fourth			Third
(In billions, at quarter end, except as noted)	Q3-21		Q2-22		Quarter			Quarter			Quarter			Quarter			Quarter
Assets in client accounts
Schwab One^®, certain cash equivalents and bank deposits	—		(9	) %	$	501.4		$	552.5		$	584.3		$	566.1		$	503.9
Bank deposit account balances	(9	) %	(10	) %		139.6			155.6			154.8			158.5			153.3
Proprietary mutual funds (Schwab Funds^® and Laudus Funds^®) and CTFs
Money market funds ⁽¹⁾	43	%	33	%		211.1			159.2			143.1			146.5			147.7
Equity and bond funds and CTFs ⁽²⁾	(15	) %	(5	) %		141.5			149.5			175.8			183.1			167.4
Total proprietary mutual funds and CTFs	12	%	14	%		352.6			308.7			318.9			329.6			315.1
Mutual Fund Marketplace^{® (3)}
Mutual Fund OneSource^® and other non-transaction fee funds	(23	) %	(8	) %		181.5			196.6			235.5			234.9			234.7
Mutual fund clearing services	(36	) %	(5	) %		175.3			184.4			235.4			254.2			271.9
Other third-party mutual funds ⁽⁴⁾	(24	) %	(7	) %		1,105.7			1,189.4			1,383.3			1,497.7			1,450.1
Total Mutual Fund Marketplace	(25	) %	(7	) %		1,462.5			1,570.4			1,854.2			1,986.8			1,956.7
Total mutual fund assets	(20	) %	(3	) %		1,815.1			1,879.1			2,173.1			2,316.4			2,271.8
Exchange-traded funds (ETFs)
Proprietary ETFs ⁽²⁾	(8	) %	(2	) %		232.2			237.7			268.5			271.8			251.6
Other third-party ETFs	(8	) %	(3	) %		1,094.6			1,129.0			1,270.6			1,296.4			1,183.7
Total ETF assets	(8	) %	(3	) %		1,326.8			1,366.7			1,539.1			1,568.2			1,435.3
Equity and other securities	(18	) %	(4	) %		2,451.3			2,548.5			3,131.1			3,259.8			2,976.7
Fixed income securities	35	%	19	%		481.5			403.5			360.7			356.4			356.8
Margin loans outstanding	(15	) %	(3	) %		(71.5	)		(73.4	)		(81.0	)		(87.4	)		(83.8	)
Total client assets	(13	) %	(3	) %	$	6,644.2		$	6,832.5		$	7,862.1		$	8,138.0		$	7,614.0
Client assets by business
Investor Services	(15	) %	(3	) %	$	3,508.1		$	3,598.7		$	4,235.5		$	4,400.7		$	4,137.7
Advisor Services	(10	) %	(3	) %		3,136.1			3,233.8			3,626.6			3,737.3			3,476.3
Total client assets	(13	) %	(3	) %	$	6,644.2		$	6,832.5		$	7,862.1		$	8,138.0		$	7,614.0
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services ⁽⁵⁾	(5	) %	N/M		$	55.1		$	8.8		$	54.6		$	33.4		$	57.9
Advisor Services	(27	) %	72	%		59.5			34.6			65.9			101.2			81.1
Total net new assets	(18	) %	164	%	$	114.6		$	43.4		$	120.5		$	134.6		$	139.0
Net market gains (losses)						(302.9	)		(1,073.0	)		(396.4	)		389.4			(99.8	)
Net growth (decline)					$	(188.3	)	$	(1,029.6	)	$	(275.9	)	$	524.0		$	39.2
New brokerage accounts (in thousands, for the quarter ended)	(24	) %	(12	) %		897			1,014			1,202			1,318			1,178
Client accounts (in thousands)
Active brokerage accounts ⁽⁶⁾	4	%	—			33,875			33,896			33,577			33,165			32,675
Banking accounts	7	%	2	%		1,696			1,669			1,641			1,614			1,580
Corporate retirement plan participants	4	%	1	%		2,305			2,275			2,246			2,200			2,207

⁽¹⁾		Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.
⁽²⁾		Includes balances held on and off the Schwab platform. As of September 30, 2022, off-platform equity and bond funds, CTFs, and ETFs were $20.7 billion, $4.5 billion, and $89.6 billion, respectively.
⁽³⁾		Excludes all proprietary mutual funds and ETFs.
⁽⁴⁾		As of September 30, 2022, third-party money funds were $3.6 billion.
⁽⁵⁾		Second quarter of 2022 includes an outflow of $20.8 billion from a mutual fund clearing services client. Fourth quarter of 2021 includes outflows of $27.6 billion from mutual fund clearing services clients.
⁽⁶⁾		Third quarter of 2022 includes the company-initiated closure of approximately 152 thousand low-balance accounts.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

The Charles Schwab Corporation Monthly Activity Report For September 2022

	2021								2022																		Change
	Sep		Oct		Nov		Dec		Jan		Feb		Mar		Apr		May		Jun		Jul		Aug		Sep		Mo.		Yr.
Market Indices (at month end)
Dow Jones Industrial Average^®	33,844		35,820		34,484		36,338		35,132		33,893		34,678		32,977		32,990		30,775		32,845		31,510		28,726		(9	)%	(15	)%
Nasdaq Composite^®	14,449		15,498		15,538		15,645		14,240		13,751		14,221		12,335		12,081		11,029		12,391		11,816		10,576		(10	)%	(27	)%
Standard & Poor’s^® 500	4,308		4,605		4,567		4,766		4,516		4,374		4,530		4,132		4,132		3,785		4,130		3,955		3,586		(9	)%	(17	)%
Client Assets (in billions of dollars)
Beginning Client Assets	7,838.2		7,614.0		7,982.3		7,918.3		8,138.0		7,803.8		7,686.6		7,862.1		7,284.4		7,301.7		6,832.5		7,304.8		7,127.6
Net New Assets⁽¹⁾	42.9		22.9		31.4		80.3		33.6		40.6		46.3		(9.2	)	32.8		19.8		31.5		43.3		39.8		(8	)%	(7	)%
Net Market Gains (Losses)	(267.1	)	345.4		(95.4	)	139.4		(367.8	)	(157.8	)	129.2		(568.5	)	(15.5	)	(489.0	)	440.8		(220.5	)	(523.2	)
Total Client Assets (at month end)	7,614.0		7,982.3		7,918.3		8,138.0		7,803.8		7,686.6		7,862.1		7,284.4		7,301.7		6,832.5		7,304.8		7,127.6		6,644.2		(7	)%	(13	)%
Core Net New Assets⁽²⁾	42.9		36.8		45.1		80.3		33.6		40.6		46.3		(9.2	)	32.8		40.6		31.5		43.3		39.8		(8	)%	(7	)%
Receiving Ongoing Advisory Services (at month end)
Investor Services	530.1		548.3		543.1		559.2		541.9		533.7		538.9		509.3		513.0		483.8		514.8		499.2		466.6		(7	)%	(12	)%
Advisor Services ⁽³⁾	3,253.2		3,399.8		3,374.3		3,505.2		3,382.4		3,342.5		3,404.6		3,190.5		3,213.8		3,040.4		3,222.5		3,150.5		2,950.9		(6	)%	(9	)%
Client Accounts (at month end, in thousands)
Active Brokerage Accounts ⁽⁴⁾	32,675		32,796		32,942		33,165		33,308		33,421		33,577		33,759		33,822		33,896		33,934		33,984		33,875		—		4	%
Banking Accounts	1,580		1,593		1,608		1,614		1,628		1,641		1,641		1,652		1,658		1,669		1,680		1,690		1,696		—		7	%
Corporate Retirement Plan Participants	2,207		2,213		2,198		2,200		2,216		2,235		2,246		2,261		2,275		2,275		2,267		2,285		2,305		1	%	4	%
Client Activity
New Brokerage Accounts (in thousands)	374		397		448		473		426		356		420		386		323		305		278		332		287		(14	)%	(23	)%
Client Cash as a Percentage of Client Assets⁽⁵⁾	10.8	%	10.4	%	10.5	%	10.9	%	11.3	%	11.5	%	11.4	%	11.9	%	12.0	%	12.8	%	12.0	%	12.1	%	12.9	%	80 bp		210 bp
Derivative Trades as a Percentage of Total Trades	23.1	%	22.5	%	23.4	%	23.0	%	22.4	%	24.0	%	22.4	%	21.9	%	22.6	%	22.3	%	24.2	%	23.3	%	23.6	%	30 bp		50 bp
Selected Average Balances (in millions of dollars)
Average Interest-Earning Assets ⁽⁶⁾	565,379		574,181		584,362		605,709		622,997		629,042		644,768		636,668		620,157		614,100		605,751		586,154		568,351		(3	)%	1	%
Average Margin Balances	81,705		83,835		87,311		88,328		86,737		84,354		81,526		83,762		78,841		74,577		72,177		72,855		73,224		1	%	(10	)%
Average Bank Deposit Account Balances ⁽⁷⁾	152,330		154,040		153,877		154,918		157,706		153,824		155,657		152,653		154,669		155,306		154,542		148,427		141,198		(5	)%	(7	)%
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells)^(8,9) (in millions of dollars)
Equities	7,596		8,840		13,099		11,519		7,384		9,371		14,177		(786	)	1,889		(1,586	)	5,589		10,465		(2,662	)
Hybrid	335		81		308		(1,207	)	(367	)	(478	)	(497	)	(529	)	(1,718	)	(1,054	)	(2,041	)	(783	)	(938	)
Bonds	6,232		4,425		4,097		5,600		1,804		(1,973	)	(7,851	)	(6,933	)	(6,121	)	(5,631	)	729		(141	)	(5,801	)
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds ⁽⁸⁾	(308	)	302		189		(2,859	)	(4,961	)	(6,318	)	(11,888	)	(16,657	)	(20,761	)	(16,258	)	(8,674	)	(7,117	)	(15,200	)
Exchange-Traded Funds ⁽⁹⁾	14,471		13,044		17,315		18,771		13,782		13,238		17,717		8,409		14,811		7,987		12,951		16,658		5,799
Money Market Funds	(1,512	)	(451	)	(1,725	)	(144	)	(1,984	)	(1,086	)	(1,344	)	(3,430	)	7,106		11,544		13,711		19,702		17,018

Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports.
⁽¹⁾		June 2022 includes an outflow of $20.8 billion from a mutual fund clearing services client. November 2021 includes an outflow of $13.7 billion from a mutual fund clearing services client. October 2021 includes an outflow of $13.9 billion from a mutual fund clearing services client.
⁽²⁾		Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client. These flows may span multiple reporting periods.
⁽³⁾		Excludes Retirement Business Services.
⁽⁴⁾		September 2022 includes the company-initiated closure of approximately 152 thousand low-balance accounts.
⁽⁵⁾		Schwab One^®, certain cash equivalents, bank deposits, third-party bank deposit accounts, and money market fund balances as a percentage of total client assets.
⁽⁶⁾		Represents average total interest-earning assets on the company’s balance sheet.
⁽⁷⁾		Represents average TD Ameritrade clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.
⁽⁸⁾		Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.
⁽⁹⁾		Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.

THE CHARLES SCHWAB CORPORATION

Non-GAAP Financial Measures

(In millions, except ratios and per share amounts)

(Unaudited)

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s third quarter earnings release contains references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the Company, and facilitate meaningful comparison of Schwab’s results in the current period to both historic and future results. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below.

Non-GAAP Adjustment or Measure

Definition

Usefulness to Investors and Uses by Management

Acquisition and integration-related costs and amortization of acquired intangible assets

Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, and, where applicable, the income tax effect of these expenses.

Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.

We exclude acquisition and integration-related costs and amortization of acquired intangible assets for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods.

Acquisition and integration-related costs fluctuate based on the timing of acquisitions and integration activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s ongoing business. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of the Company’s underlying operating performance.

Return on tangible common equity

Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets — net, and related deferred tax liabilities.

Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet.

The Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.

THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)

The tables below present reconciliations of GAAP measures to non-GAAP measures:
	Three Months Ended September 30,												Nine Months Ended September 30,
	2022						2021						2022						2021
	Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income			Total Expenses Excluding Interest			Net Income
Total expenses excluding interest (GAAP), Net income (GAAP)	$	2,823		$	2,020		$	2,559		$	1,526		$	8,475		$	5,215		$	8,122		$	4,275
Acquisition and integration-related costs ⁽¹⁾		(101	)		101			(104	)		104			(291	)		291			(367	)		367
Amortization of acquired intangible assets		(152	)		152			(153	)		153			(460	)		460			(461	)		461
Income tax effects ⁽²⁾		N/A			(62	)		N/A			(61	)		N/A			(183	)		N/A			(208	)
Adjusted total expenses (non-GAAP), Adjusted net income (non-GAAP)	$	2,570		$	2,211		$	2,302		$	1,722		$	7,724		$	5,783		$	7,294		$	4,895

⁽¹⁾		Acquisition and integration-related costs for the three and nine months ended September 30, 2022 primarily consist of $57 million and $166 million of compensation and benefits, $36 million and $102 million of professional services, and $6 million and $14 million of occupancy and equipment. Acquisition and integration-related costs for the three and six months ended September 30, 2021 primarily consist of $58 million and $227 million of compensation and benefits, $35 million and $99 million of professional services, and $7 million and $30 million of occupancy and equipment.
⁽²⁾		The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs and amortization of acquired intangible assets on an after-tax basis.
N/A Not applicable.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
	Amount		% of Total Net Revenues		Amount		% of Total Net Revenues		Amount		% of Total Net Revenues		Amount		% of Total Net Revenues
Income before taxes on income (GAAP), Pre-tax profit margin (GAAP)	$	2,677	48.7	%	$	2,011	44.0	%	$	6,790	44.5	%	$	5,690	41.2	%
Acquisition and integration-related costs		101	1.8	%		104	2.3	%		291	1.9	%		367	2.7	%
Amortization of acquired intangible assets		152	2.8	%		153	3.3	%		460	3.0	%		461	3.3	%
Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP)	$	2,930	53.3	%	$	2,268	49.6	%	$	7,541	49.4	%	$	6,518	47.2	%

	Three Months Ended September 30,												Nine Months Ended September 30,
	2022						2021						2022						2021
	Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS			Amount			Diluted EPS
Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP)	$	1,884		$	.99		$	1,406		$	.74		$	4,814		$	2.53		$	3,911		$	2.06
Acquisition and integration-related costs		101			.05			104			.05			291			.15			367			.19
Amortization of acquired intangible assets		152			.08			153			.08			460			.24			461			.24
Income tax effects		(62	)		(.02	)		(61	)		(.03	)		(183	)		(.09	)		(208	)		(.10	)
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)	$	2,075		$	1.10		$	1,602		$	.84		$	5,382		$	2.83		$	4,531		$	2.39

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Return on average common stockholders’ equity (GAAP)		25	%		12	%		18	%		11	%
Average common stockholders’ equity	$	30,282		$	47,492		$	36,526		$	47,908
Less: Average goodwill		(11,951	)		(11,952	)		(11,952	)		(11,952	)
Less: Average acquired intangible assets — net		(8,999	)		(9,609	)		(9,151	)		(9,762	)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net		1,848			1,895			1,867			1,913
Average tangible common equity	$	11,180		$	27,826		$	17,290		$	28,107
Adjusted net income available to common stockholders ⁽¹⁾	$	2,075		$	1,602		$	5,382		$	4,531
Return on tangible common equity (non-GAAP)		74	%		23	%		42	%		21	%

⁽¹⁾

See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

View source version on businesswire.com: https://www.businesswire.com/news/home/20221017005243/en/

Contacts

MEDIA:

Mayura Hooper

Charles Schwab

Phone: 415-667-1525

INVESTORS/ANALYSTS:

Jeff Edwards

Charles Schwab

Phone: 415-667-1524

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